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Who Buys This Stock?

By Floyd Norris June 21, 2007 11:02 pmJune 21, 2007 11:02 pm

In my Friday column, I discuss Universal Express, a penny stock that is issuing billions of shares of stock each quarter. Those shares are evidently being sold in the market, and the cash enables the company to stay in business. A federal judge has ruled that those sales are illegal, but that has not stopped them.

What puzzles me is who is doing the buying. If any reader has had the stock pitched to them, I’d love to hear the details.

In the column, I did not go into the company’s varying explanations for saying its case against the S.E.C. is pending, when court records show Universal’s appeal was denied and no futher appeal had been made.

When I talked to Richard Altomare, the chief executive, he told me there was an appeal pending. “It is in the appellate division of the state of Georgia,” he said. When I asked how a federal court ruling could be appealed to a state court, he said I should talk to Chris Gunderson, the company’s general counsel.

Mr. Gunderson has a different view. “It is an accurate statement because the case is going to be refiled in the Florida courts,” he said. The fact it has not been filed does not mean it is not pending, in his opinion.

As far as he is concerned, the company was also under no obligation to tell shareholders about the court ruling in the 10-q for the first quarter, “because the order was not filed until April 2.” That is not what the docket says; in fact it discloses that Universal’s motion for a rehearing was filed on March 8.

In any case, companies often disclose things that happened subsequent to the end of a quarter, but prior to the filing of a quarterly report. This report was filed on May 21. And it is hard to imagine anything more material to a company than a court order that it pay a sum many times greater than its annual revenues.

Mr. Gunderson did fill me in on how he thinks the law is supposed to work, which is different from how the judge sees it. In his view, because the company had asked for a jury trial, the judge had no legal authority to find for the government on a motion for summary judgment. He says the S.E.C. kept from the judge the fact the company wanted a jury trial. (The judge’s opinion, however, cites precedents saying that summary judgment by a judge is proper if a “reasonable jury” could reach no other conclusion.)

Both Mr. Altomare and Mr. Gunderson think I am wrong to focus on the company’s conduct, because the only important issue is naked shorting. Mr. Gunderson said that practice had “destroyed 3,000 companies,” a number he raised to 4,000 after I asked for a list. He then mentioned only a few companies, among them Overstock.com, which has vigorously complained about naked shorting but has not been destroyed.

In any case, it is not clear that the company is now a victim of naked shorting, as it claims. The official figures show almost no shorting, naked or otherwise. But on Thursday the company put out a news release demanding official investigations of what it sees as a practice to hide such short-selling.

I asked Mr. Gunderson if the case against naked shorting was hurt when it was made by a people that a federal judge labelled as “repeated and remorseless violators” of the securities laws. He told me it was not, because the judge simply did not understand the law.

In a statement last week, Mr. Altomare said, “When the Security and Exchange Commission is reminded that it too must answer to the Constitution of the United States of America and the property laws contained therein, all Americans win.” (He meant Securities and Exchange Commission, but that is not what the release says.)

I know of no court that has ruled the S.E.C. acted as if it were above the law. But one did rule that way about Universal.

Big news is due out Monday which is going to blow this off the charts
Get in before it hits

About
D Mecatronics Inc. designs, manufactures and markets industrial and consumer
products. Through independent subsidiaries, we provide state of the art automation technology solutions to enable customers to dramatically
accelerate time-to-market and increase revenue

Automation is world we live in and these guys know what they are doing. This is not a smoke stack, its real with real products vital to big
companies

Don’t wait for it to double, pull the trigger monday

Little stook Sizzle as the Big Ones Fizzle
stok to Consider Right Now?

(Disclosure: I didn’t buy any to unload at a fat profit to gullible New York Times readers.)

Misters Gunderson and Altomare seem to be very practiced spokesmen for their cause. These are the type of folks the Bush administration could certainly find a useful position for; conservative yet compassionate for thier own needs.

Floyd you wrote “I know of no court that has ruled the S.E.C. acted as if it were above the law. But one did rule that way about Universal.

The court you are referring to is Gerard E Lynch’s, he ruled on findings of FACT that were not in the scope of his authority . 1 year after his summary judgement he offered a STAY on his judgement , Richard and his lawyer Art Tifford refused .

The reason he offered a stay was because he read the appeal to the 2nd circuit court and realized that he will be embarassed if they overturned his judgement .

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